Al Saunders Contracting – Federal Court of Appeal finds that s. 6(1)(b)(vii) precludes bifurcation of an unreasonable allowance into a reasonable and unreasonable portion

The Tax Court found that some of the travel allowances paid to employees of the taxpayer were reasonable and, thus, properly excluded from income under s. 6(1)(b)(vii), but that other of the allowances were unreasonable in amount – and excluded the reasonable portion from income. In finding that the Tax Court had thus erred in its latter findings by severing travel allowances into two parts: a portion that was unreasonable; and a portion that was reasonable - so that the reasonable portion was excluded, Dawson JA stated:

I take from the grammatical and ordinary sense of the language of subparagraph 6(1)(b)(vii) that … [a]llowances that exceed what is reasonable are to be included in their entirety in income.

She also noted that when s. 6(1)(b)(vii) was amended in 1991 to take its current form, the Technical Notes confirmed this purpose of the provision.

Neal Armstrong. Summary of Canada (National Revenue) v. Al Saunders Contracting & Consulting Inc. 2020 FCA 89 under s. 6(1)(b)(vii) and Statutory Interpretation - Hansard, explanatory notes etc.